TTC Capital Budget and Plan 2021

Updated December 22, 2020 at 1:20 pm: Some illustrations from the Board meeting presentation have been added to this article, or have replaced previous versions with lower resolution from the budget report. Text has been added in some sections notably in comments about the timing of future projects and spending.

This is a companion article to my piece on the Operating Budget for 2021. This year operations will have a big challenge because subsidies are needed to backfill lost fare revenue, and yet politically, spending money on what we already have does not have the allure of announcing yet another subway plan. “Look! Another bus on Dufferin” does not stir the blood in quite the same way although one might argue that the long-suffering riders there are equally “deserving” of attention.

The Capital Budget has its own problems. For many years the true need for transit capital in Toronto was hidden so that the depth of the funding hole would not be obvious. Magically, there always seem to be enough capital to cover current costs, and somehow future years took care of themselves as they became the new present.

That scheme came unglued as TTC capital needs rose and available money went to the flashy new projects: a subway here, an LRT there, and of course an expressway rebuild lest those non-transit riders should be delayed on their vital journeys to and from downtown. A new class of project “below-the-line” was invented to accommodate work that was necessary, but for which money had yet to be found.

However, even getting on that unfunded list required acknowledgement that a project was necessary, and a long list of below-below-the-line work accumulated. In budgetary terms, this tactic was non “sustainable”. One cannot claim to be making a budget while ignoring over half of one’s future needs. Far from being ready to face the future, the TTC had a long queue of projects needed to refresh decades-old infrastructure, but no money to pay for them because they officially didn’t exist in the mind of fiscal planners.

This was not entirely the TTC’s fault. The City of Toronto preferred to have its transit system and appetite for capital look as if everything was in hand. The situation was not helped one bit by the prevailing attitude among some politicians that transit infrastructure, especially subways, is near-immortal while, in fact, lines dating back to the mid-20th century were showing signs of their age.

The situation was simply untenable as what once was “the future” banged loudly on Toronto’s door. In early 2019, a 15 year capital funding outlook was presented to the TTC Board including a $33.5 billion projection of capital needs to 2033.

The capital budget and ten-year plan before the Board on December 21 is not a full update of the 15-year plan, but it shows the transit funding crisis Toronto faces quite starkly. The 15 year plan’s status today is:

… the CIP has been updated and further refined in accordance with Board and Council direction, resulting in a 2021 to 2035 CIP that totals $37.7 billion, of which $10.349 billion is unfunded within the first 10 years and a total of $23.239 billion over the 15-year period. [p. 1]

The total does not in include major expansion projects beyond closeout of the Spadina extension project ($120 million), end-of-life support for the SRT ($47 million), and design work for the Waterfront LRT ($50 million). This is small change on the scale of the 15 year plan’s billions.

How Much Can We Afford?

The major components of the 10-Year Capital Plan are listed in the chart below. These are only the funded components, and another $10.35 billion will be needed for all of the work planned in this decade.

It does not take an accounting genius to figure out that when 2/3 of the spending in a 15 year plan is unfunded, many items will jostle for attention and there is no guarantee all will move into “funded” status even without competition from new projects. This is similar to past practice, where the 10-year view was artificially constrained, but at least now we have sense of what lurks in the margins.

The 15-year spending is broken among major categories as shown in the chart below. The subway takes by far the lion’s share, and Line 2 BD is particularly high because its plans include new trains, new signals and a new western yard. Subways are wonderful, but they are not cheap to own.

Of the $11.9 billion in funded projects shown above, $1.4 billion goes to the Bloor-Yonge Station expansion project.

The ten year plan is broken down in the table below to show the annual cash flow for funded projects.

Funding comes from many sources, but the largest contributor is the City of Toronto through its tax base. This includes Mayor Tory’s City Building Fund which is still ramping up to its full level of 2.5% over a five-year period, but it does not include Mayor Ford’s Scarborough Subway tax at 1.6% which has not yet been allocated to any specific project.

Looked at overall, the federal and provincial contributions are larger, but that is due to a provincial takeovers of major projects and special funding on the operating side for Covid relief. For the base capital program, the City carries much of the cost of ongoing major repairs and asset replacement.

Other governments would have to invest substantially to rise to the City’s level, let alone to exceed it, and a large gap between committed and required funding would still remain.

The version of this table in the Board meeting presentation is slightly different from the one in the staff report because TTC depreciation and Development Charges levied by the City have been consolidated under “City” funding.

The Capital Plan has grown in the past year by about $2 billion, and this required some projects to be shuffled in time. Notable among these is the new western yard for Line 2 BD. I will return to this later in the article.

The capital spending within the first ten years has shifted somewhat to bring projects forward. Among the changes are the timings of fleet procurement and accessibility improvements at Warden and Islington Stations.

$11.9 billion may be a lot of money, but it is little more than half of the needs of the coming decade. Many projects remain unfunded, and these are not items than can be easily deferred without affecting future service capabilities. In addition to the $10.3 billion listed below, a further $10 billion unfunded work lies in years 11-15 of the plan.

One might wryly consider the eager politicians (and not a few mandarins) at Queen’s Park who have lusted after the TTC. They must think twice when confronted with the scale of its future capital needs. Most of these items do not offer ribbon-cutting opportunities quite like project announcements, construction launches and new lines opening for service.

The overall picture is consolidated in the chart below. To put this in context, the total is more than the value of the Ontario Line, the Scarborough Subway, and LRTs on Finch and Eglinton West.

City Hall followers will remember the “iceberg” model of municipal finance frequently cited in budget presentations. The situation at the TTC now resembles a formidable mountain range.

What is particularly troubling here is a comparison of the plan in 2020-2034 to the one for 2021-2035. This is hailed by management as a great accomplishment, but the revised plan shifts more spending to the latter part of the. This is the same problem of deferring costs beyond the City’s 10 year planning window that has plagued past budgets. Among the deferred projects is a ninth bus garage and a new western yard for Line 2 BD. These decisions constrain future growth.

Over the coming decade, vehicles and infrastructure are the two major components of the funded programs. The declining value, especially for vehicles, reflects the fact that much of the future vehicle needs are unfunded. Some TTC Board members hope that this will be remedied with stimulus funding from the federal government. However, “stimulus” usually relates to short term spending, not for vehicles to be delivered later in the decade.

The backlog of unfunded State of Good Repair continues to grow. Note that this is only for capital maintenance of the existing system, not for system expansion which is an added cost competing with SOGR for funding.

Major Project Planning

The Capital Budget includes funding for planning work on several major projects. Note that the projects themselves, should they proceed, are not necessarily included in the 15 Year Capital Plan nor funded. An example of this is the platform edge doors proposal which would likely run to $1 billion for lines 1, 2 and 4.

Projects such as the Waterfront LRT are not listed here because they are funded in the “transit capital expansion plan” which is separate from the main capital budget. This treatment is left over from the era when major projects such as new subway lines were carried in the TTC budget, but separate from the ongoing state-of-good-repair items. Most of these projects are now on the Province’s books.

For the information of readers:

  • The Hillcrest Track Replacement [&] Expansion refers to the repurposing of Harvey Shops as a new carhouse. This would support streetcar fleet expansion and shift the operation of one or more routes closer to their depot.
  • The Inglis Building is the administration building at Hillcrest.
  • The Retail Assessment Study is intended to review subway station facilities for shops (newsstands, cafés, etc).

The Rejuvenation of Line 2 Bloor-Danforth

In days that seem very long ago, when Andy Byford was still CEO at the TTC, there was talk of a consolidated project to bring Line 2 BD up to scratch for much-needed re-investment. The lesson from Line 1 was that doing things piecemeal led to chronic underfunding and problems with project co-ordination. Line 2 was to be different.

Three major projects were foreseen: conversion to Automatic Train Control (ATC), replacement of the fleet, and opening a new western yard on lands near Kipling Station. This would be purpose-built for a new fleet of TR-like trains, and the City of Toronto is already in the process of acquiring the property for the yard.

Greenwood yard and shops, as designed, cannot handle six-car trainsets such as those now used on Line 1. It was built in the 1960s for then-current pairs of cars that could be separated, moved and maintained independently.

Two related projects were the Scarborough Subway originally intended to open in 2026, and the Relief Line at least to Danforth. Ideally, Line 2 would be well on its way through conversion before the SSE began operation, and space in Greenwood Yard would be needed for Relief Line trains.

However, pressures on the budget meant that parts of the Line 2 project were shifted. Purchase of new trains was deferred until well after the 2026 SSE date, and the western yard vanished into the 2030s. One option for the SSE was a transitional, throwaway block signal system so that T-1 trains could operate in what would be designed as ATC territory. Most recently, the Ontario Line has removed the need to house an RL fleet at Greenwood because the OL will have its own maintenance facility in Thorncliffe Park.

Keeping the T-1 trains now used on Line 2 would be something of a gamble, and Toronto has already seen what happens to a fleet that is kept beyond its time both with the aging CLRV and ALRV streetcars and with the SRT.

If all of this has the feel of being planned on the back of an envelope or a napkin, you are probably not far off of the mark. Projects were moved around to suit spending priorities and what TTC management thought they could fudge their way through for the next decade. All of this is far too complex for the TTC Board or Council, and they defer to management. After all, the key requirement, keeping capital spending down, was achieved, at least on paper.

Current plans will now see the T-1 trains replaced in the mid-to-late 2020s, and Line 2 substantially converted to ATC by the end of the decade, both in time for an ATC-equipped SSE to open in 2030.

The T-1 fleet is larger than required for current Line 2 service. Some of the T-1s were originally planned for use on the Vaughan extension of Line 1 (before the ATC conversion was decided), and of course Line 4 Sheppard operated with them until 4-car TR sets were provisioned.

The planned Line 2 replacement fleet would be the same size as the TR fleet. The “surplus” trains would be used to operate the extended service to Sheppard, although this will likely involve a turnback operation at Kennedy (much like the one at Glencairn on Line 1 in pre-Covid schedules). Metrolinx has reintroduced a turnback track at Kennedy in the SSE plans specifically for this purpose.

In order to handle the shift of T-1 trains from Lines 1 and 4, the TTC reactivated Keele Yard, added storage at Greenwood Yard, and plans new storage at Kipling Station. Any fleet expansion will require the western yard, and the transitional period will be tight on space. Some of the surplus T-1 trains will have to retire simply to make room for the new fleet. Greenwood shops will require changes to handle the new trains concurrently with the old ones.

The timing of these interlocking projects is critical, and it is only the delay in the SSE’s opening date that has taken some of the pressure off of project timing and capital planning. All the same, there is little time for further schedule changes.

This is a key example of what happens when project schedules are adjusted for political reasons – moving expenses in and out of the budget to suit available funding and priorities – rather than being presented as a co-ordinated package, expensive though an all-inclusive view would appear.

Looking at the Details

An Appendix to the Capital Budget breaks down its major components and shows the gap between committed support and unfunded needs. There is a more detailed line-item version of this, but it has not yet been published. The “Blue Books” containing detailed project descriptions usually do not appear until the new year, after the budget is finalized.

The snippet below is a chunk out of page 1 of the appendix (click to expand it to a readable scale). Each project contains three lines:

  • The first, in blue, shows committed spending, or more accurately allocated spending as “commitments” from governments come in blocks and are parceled out among individual project lines by management.
  • The second, in red, shows the unfunded project needs.
  • The third, in black, shows the total project cost.

Reading across, spending plans are broken into segments:

  • The first segment shows actual spending to 2019 plus probably spending in 2020.
  • The second segment shows year-by-year spending from 2021 to 2030 with subtotals at the five and ten year marks.
  • The third segment shows the projected costs beyond 2030 and the estimated final cost (EFC) of the project. It is possible that some projects would extend beyond the 15-year window, but this breakdown is not shown.

The Appendix concludes with grand totals (click for a readable version). This shows the extraordinary shortfall in the capital available to undertake the TTC’s 15-year plan with annual deficits rising to $1.77 billion by 2029. This is a long-term threat to the health and survival of the TTC as a credible provider of transit service.

Interested readers can delve into the report for further details on the capital program.

Staffing

The TTC has a substantial cadre of management and staff who are dedicated to capital projects, and their cost is charged to the projects they work on. (Some staff cross over to day-to-day operations work, and their cost is pro-rated between the two budgets.)

The TTC plans to add 77 capital staff to support various projects in 2021.

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